Sunday, October 27, 2013

Every Dark Cloud Has a Silver Lining

The revised RPGT is sure to dampen speculation in the property market. While this is good for home-occupier buyers and genuine investors, the same cannot be said for speculators. 

 Property prices have been going up and up since 2008 because of speculative demand. I bought a fully furnished corner lot in Aseana Puteri Condo at Bandar Puteri for RM380,000 in 2010. This unit can easily fetch RM650,000 presently. In 2006, this unit could be booked for RM280,000. 

The RPGT is now revised as follows:

 1. A property sold within 3 years after acquiring it, the gained tax is 30%

2.  A property sold within 4 years after acquiring it, the gained tax is 20% 

3.  A property sold within 5 years after acquiring it, the gained tax is 15% 

4.  Beyond 5 years, there is no gain tax for individuals, but for corporates, there is a
     gained tax of 5%.

Looking at the above taxes, it is hard to believe that speculation in the property sectors will not be dampened. One has also to factor in the transaction costs such as legal fees, stamp fees and brokerages. 

Once speculation is curtailed, demand will slow down. This will stabilize prices. 
It may even cause prices to drop substantially. 

What is of concern is that when demand slows down, developers will scald down their operations. This will hurt their bottom line. Companies involved in building materials will also be affected. 

For those companies that have good lands in fast-growth area like the Iskandar region, what they should do is to switch to high-end buildings that sell above RM1 million because foreigners are only allowed to buy properties priced above RM1 million. I think it is good for the country if more foreigners buy our properties as this simply mean an influx of foreign funds and foreigners who are financially sound.

Security means everything to every everybody. It is heartening to see that the government is cognizant of this fact, and have taken steps to beef up our military force and the police. When a country is not safe, not only tourism will be greatly affected, overall business will be affected as well. 

Every dark cloud has a silver lining. When speculators in the property market find it hard to make a fast buck, they may turn their attention to the stock market. Is this the silver lining? Let's wait and see what happens.